What are the most important highlights of the NEW Trump Account?
One Big Beautiful Bill Act (OBBBA) Trump Account Highlights
Trump Account Establishment:
A Trump Account is established for the exclusive benefit of an eligible individual. An eligible individual is any individual (i) for whom an election is made to establish a Trump Account, (ii) who has not attained age 18 before the close of the calendar year in which the election is made, and (iii) for whom a social security number has been issued before the date of the election. Contributions to Trump Accounts cannot be made before July 4, 2026.
How is an initial Trump Account CREATED with respect to an eligible individual?
An authorized individual may elect to have a Trump Account established for the benefit of an eligible individual by making the election on IRS Form 4547, Trump Account Election(s), or through an online tool or application on trumpaccounts.gov. A Trump Account may be established at the same time as an election is made to receive a pilot program contribution under section 6434 or at any other time before January 1 of the calendar year in which the beneficiary attains the age of 18. By making the election, the authorized individual is representing, under penalties of perjury, that he or she is authorized to elect to have the Trump Account opened for the benefit of the eligible individual.
Trump Accounts contribution Pilot Program:
Upon an election under the pilot program, $1,000 is paid by the Secretary to the Trump Account of an eligible child.
An eligible child means a qualifying child (as defined in section 152(c)) who is born after December 31, 2024, and before January 1, 2029, who is a U.S. citizen, and for whom no prior pilot program election has been made. Additionally, the eligible child must have a social security number that is included with the election.
Contributions:
During the growth period, there are five types of contributions that can be made to a Trump Account:
(1) a pilot program contribution from the Secretary of $1,000 for an eligible child.
(2) qualified general contributions (funded by states (or political subdivisions thereof), the United States, the District of Columbia, Indian tribal governments, or section 501(c)(3) tax-exempt organizations) for members of a qualified class of account beneficiaries.
(3) employer contributions that are not includible in the gross income of the employee under section 128 (section 128 employer contributions).
(4) qualified rollover contributions.
(5) contributions from other sources (such as the account beneficiary, parents, or any other person).
May contributions be made to a Trump Account and to an Individual Retirement Arrangement that is not a Trump Account for the same individual during the growth period?
Yes, contributions may be made to a Trump Account and to an individual retirement arrangement that is not a Trump Account for the same individual during the growth period. During the growth period, contributions that are not exempt contributions may be made to a Trump Account up to the section 530A(c)(2) limit and without regard to whether the account beneficiary has compensation.
Contributions also may be made to an Individual Retirement Arrangement that is not a Trump Account for the benefit of the account beneficiary in accordance with section 408 if the account beneficiary has includible compensation under section 219(b)(1).
Eligible investments:
During the growth period, funds in a Trump Account may be invested only in eligible investments. An eligible investment, generally, is a mutual fund or exchange traded fund (ETF) that tracks an index of primarily U.S. companies, such as the Standard and Poor’s 500 stock market index, does not use leverage, does not have annual fees and expenses of more than 0.1 percent of the balance of the investment in the fund, and meets other criteria that the Secretary determines appropriate.
Distributions:
During the growth period, no distributions may be made from a Trump Account, except for qualified rollover contributions, qualified ABLE rollover contributions, distributions of excess contributions, and distributions upon death of the account beneficiary.
After the growth period (that is, starting January 1st of the calendar year in which the account beneficiary attains age 18), distributions from a Trump Account generally are subject to the rules that apply to distributions from a Traditional IRA, including that a distribution may be subject to the section 72(t) 10% additional tax on early distributions if an exception does not apply with respect to the account beneficiary (such as for distributions for qualified higher education expenses or first home purchases or distributions made after age 59½).
After the growth period, what rules apply regarding the TAXATION of distributions from a Trump Account?
After the growth period, distributions from a Trump Account are subject to the Individual Retirement Arrangement distribution rules under section 408(d), which generally apply to Trump Accounts in the same manner as distributions from other Traditional Individual Retirement Arrangements.
For example, distributions of amounts that are allocable to basis are not includible in gross income but all other amounts, including all earnings of the account, would be included in gross income upon distribution. However, section 408(d)(2) is applied separately with respect to a Trump Account and other Individual Retirement Arrangements.
Accordingly, after the growth period, the portion of a distribution from a Trump Account that is allocated to basis in the account is the portion of the distribution that bears the same ratio to the total amount of the distribution as the individual’s total basis in the Trump Account bears to the total value of the individual’s Trump Account.
In addition, at all times, Trump Accounts are disregarded for purposes of determining the portion of a distribution from a Traditional Individual Retirement Arrangement that is not a Trump Account that is allocated to basis. The Treasury Department and the IRS anticipate issuing additional guidance with respect to this tax treatment for individual retirement arrangements in general.
What type of Individual Retirement Arrangement is a Trump Account?
A Trump Account is a Traditional IRA under section 408(a). A Trump Account cannot be an individual retirement annuity under section 408(b), SIMPLE IRA under section 408(p), or Roth IRA under section 408A.